on tuesday former president bill clinton will sit down with me. a lot to talk to him about considering the markets, the economy and upcoming the election. join me for that first on cnbc interview on tuesday at 4:30 p.m. that will do it for us. follow me on twitter and google plus. see you monday. sea of red as fears run rampant. dow has given back all its gains for the year. nasdaq is in correction territory and the broader s&p in correction territory as well. welcome to a special session of "options action." we're live from the nasdaq market site. these are the traders here in times square and in los angeles tonight. the goal here is clear. find strategies and names that can preserve your capital and help you make money. we need to talk about the price action. it was terrible. a bloodbath. >> this sort of price action we

got through it last summer and into fall. the volatility regime investors had to live with. the whole run up in q1 was the exact opposite. a lot of complacency. the vix in the teens for a long period of time. now we're at the highs the year in the vix. we're seeing single stock action. look at the stock like wells fargo. if i heard at it million times this year on this network from investors talking about this wells fargo as a safe haven they are not exposed that stock went down 6%. that's a panic. you're seeing that across a lot of sectors. air came out of the home builders. the price action is really troubling. >> mike, we've been talking so much on this network, so many people out there indicating dividend paying stocks. today you may have lost 3% on the principal. there were no safe havens in this market. have the attitudes changed in

the options when it comes to these defensive names? >> the first thing i would say is that there are no defensive stocks when people are concern as i think they are right now about a deflationary environment conflicting with the big credit problems that we have over in europe. i think that's really what is challenging many of these stocks. to your point, yes we definitely did see some defensive posturing earlier this week. i think the best example of all might have been exxonmobil where we saw the price of buying down side puts was about as high as it's ever been relative to the at the money volatility and 10% money calls. it was extremely sharp that we took a look at these names. what people were concerned about was that the macro economic pressures were going to put pressure on these stocks and the dividend wasn't going matter if you started to see earnings drop. >> that's right. when the stock is down a ton it can overwhelm any dividend you'll get for the entire year. there was no place to hide. for the s&p no relief at all during the day. it didn't close on the dead low.

vix was up 11%. didn't close on the debt high but closed right on the debt high. on the spdr people were looking for protection. 18 of the 20 trades were puts. people wanted protection. they are worried about the weekend and spain and everything that's going on in europe and they are worried now about asia. so people were worried about everything today. they were buying protection. >> vix at levels, 26.6, was up 11% on the session. dan, were there any sort of flyers being taken on any individual stocks that popped up to you or sectors for that matter? >> gold, for instance, in the morning there was a very big call spread. a couple of big call spread. mike and carter will talk about it in a minute. people were looking at the mid-150s to 165 and some as high as 170, 180 call spread in july and very good size. in a lot of ways these guys will

talk about it. it's one of the few assets people will reach for in this environment. >> well get to that in a moment. what really popped out at me this morning is the trade in freeport mcmoran. when china coming in weak with a doomsday tone that the markets took over all mcmoran wouldn't catch this cube short covering, not a rally but in a down take this is outperformance by fcx. it did raise eyebrows. >> we see this type of economic data and people think there's some currency debase as a result of another round of qe. we see this between commodity prices that are hinged to global macro economic concerns like oil and people concerned about the currency issue which is why they rush into things like gold. when you look at something like copper which has been hit hard for a long time it doesn't surprise me that there might be confusion there. what do we do?

copper might be a safe haven because it's a commodity but it could be hit because of macro concerns. i think this is a little bit of short covering and people are still trying to figure out how to deal with it. >> other bright spots the miners, up by 6.5%. gold of course had a nice bounce. the question here is do you buy this bounce. is gold a safe haven? let's see if we can find the answer. carter did say to get short back in march when the commodity was topping out. carter what does it took like now? >> there's no real structural change to that trade which is stay short. as dan knows and others when things come apart people dump everything. gold was down real hard during the may period in '08. here's the chart in the last two years. when you have a well defined trend and you bounce off a line, when you break trend and throw back the line it's like a rally

last-gasp. this is where you usually run out of trouble. today's knee jerk reaction, it closed. look at the five year period. it tripled. it's as straight as an arrow. we broke trend rallied with the trend, well documented moment in charting bad moment for gold. >> all right. so mike would you agree with carter? >> i think one of the things that dan pointed out and he was right about this is not everything always stands to reason and i think when people get very panicky i can understand why they would rush into this. i would probably be more inclined if i had to make a bullish bet to do it in the miners like mcmoran that lowers their input costs. i do think this is a source of liquidity for a lot of very weak hands and one of the reasons it's been getting hit. it could be used as an atm machine as people need that

liquidity and i'm inclined to think as we start to see these prices fall gold can as well. >> mike has a bearish view on gold so he's buying a put for those who are new to the show. this is the simplest trade you can do. let's review these strategies. in this play you want the stock to fall below the strike of that put by more than the cost of the trade. that's where you see profits. but above that you'll see losses. so mike walk us through your trade. >> as you pointed out i can't get a whole lot simpler. i wouldn't want to be naked short in any direction and that's one of the reasons why i want to use a put to used my bearish bet. i will admit that these are more expensive than they would have been a day ago, a week ago. if you went back a whole year they would be about two bucks. i think the way things are moving around right now these are pretty fairly priced. if you do see a decline in gld because that's what we're trading, you want to look for opportunities to spread to take

advantage of the fact there's so much concern and options premiums are as elevated as they are. >> where do you fall on this trade? >> i mentioned these call spread. july somebody bought 25,000 of the july 157, 172 call spread today. paid about $4. they did it in two parts throughout the day. that's a lot of premium for a $15 wide call spread. that's obviously somebody reaching for something there and like these guys just said in a day like today there's very few things where you think can be counter intuitive to the price action. people move to gold. >> one quick thing about call spread on gold, you'll hear us say these type of things. we like selling call spread and put spread. gold is a different dynamic. actually you can buy some of those call spread as a replacement forgoing out to buy the underlying. if you disagree with me and carter, call spread are a better way to do it. can you spend about 30 to 33% of the difference between the strikes to make those bullish

bets. much more effective way to do it. >> well you out there might be asking if you're bearish on gold why not short the thing. the answer is shorting gold or anything for that matter carries unlimited risk and in a risk off world your don't need that. suggests a $325. our thanks. moving on i want my money back. that's from facebook investors as the much hyped offering has become one of the worst ipos of all time. the stock in fact has lost 26% since its debut and only two weeks old. now dan has an option strategy that can get your money back but before we get to that let's talk about the stock. now i had asked carter before at what point can you employ technical analysis. you said one year. >> that's a really interesting question. it does take a while to get those inputs at least from a technical standpoint. the other things that we'll have

to rely on where are the levels. 38 will be a massive level. that's where the ipo was issued. that's where people will want to get their money back in a lot of ways. this is a tough one. we've been talking about it on the desk. i didn't want to buy it at 38. i don't want to buy it here. >> i think facebook has lots of problems. i would rather go with linkedin. linkedin is for people with jobs and money. i'm not a big fan of facebook. >> you taught take a look at it. take a look at the fundamentals and you'll realize any kind of a valuation here you have to suggest significantly lower. i hate to say it. here's the fact of the matter. you even believe the optimistic assumption they will make $2 million in full year 2013 and growing at 30% those are two ambitious targets. it will be worth about $60 million. that's a significant discount. >> so we're fairly bearish on fb

but a lot of people bought the stock, maybe got stuck with it on the ipo, they couldn't cancel their order, they are in a tough boat. at this point, dan, our strategy tonight is to try and actually make a little money? >> i'll just say this. i've bureau of engraving and printing asked this question a dozen of times pap lot of people didn't expect to get a lot of stock. they own this thing and then a lot of people wanted to broke when it broke the ipo price. a lot of people own this thing. i cannot look out and find an identifiable catalyst why this stock should go up in the next couple of months. they will report their first earnings report as a public company sometime in august expiration. so if you own this stock and you got overfilled on the ipo there's a strategy that i think makes a lot of sense using options which is not adding a whole heck of a lot more risk. >> let's try to help those poor facebook shareholders out there. dan is doing a one buy two call spread. let's open that playbook.

a bullish strategy you're against a long. buy one call and sell not one but two calls against it. the goal here you want the stock to go the strike of the calls that you sold. that's where your profit max's out. >> we wouldn't recommend a trade where you're naked short a call accepts like this. one of the things, let's say you own this stock much higher than where it is. when that's 27.75 today i priced up the august 3034 one by two call spread it cost about a dime. so i bought one of the august 30 calls for 210. against a long stock position and sold two of the august 34 calls p.m. my premium outlay is ten cents. what i'm doing is i own the stock, i own one of the august 30 calls and short two of the 34 calls. how do i make money here? below 30 i just have the losses or the gains of the stock that

it own plus the 10 cents in premium that i spent for that structure. if the stock is above 30.10 i can make up to 3.90. at 34 my long stock would actually get called away but i actually basically have this 3.90 profit, buffer there between those two strikes. so this is like a really levered overwrite without a whole heck of a lot of risk. you own this stock it can be called away by 34 bucks but you have an extra $4 in gains. >> a lot of investors would be ecstatic. >> you are levered in the right direction that's up and you're not any additional leverage in the wrong direction and that's down. that doesn't mean facebook can't continue to drop. it may very well do that. but people would love to get called away an effective price of the ipo price. >> mike, would you bother

putting on this sort of trade? >> 100% we talked about a trade like this actually on "fast money" earlier and jpmorgan this week. one of the reasons is people get caught in these stocks at higher prices and the temptation is to commit more capital to trade, buy more stock. i think this week is a good example of why you absolutely don't want to do that. people can get themselves in bad situations. they keep talking and joking about it. for a lot of people it didn't work out for facebook. don't start investing more money in it. work your way out of the trade. >> average down could be a huge mistake. that's sort of like drilled into investors psychology. >> the thing is this was so hyped. every broker was pushing this on every client. this is not a recommendation to buy the stock. if you're long and looking to get some of the losses back this is one of the way to do it. >> i want to buy facebook only for the zuckers of the world.

100 shares still cost nearly $300,000. the call spread is only to be used against a long cost 10 bucks and could be worth 400. got a question out there. send us an e-mail. the address is optionaction.cnbc.com. here's what's coming up next. now that's a whale of a good trade. dan made a bearish bet on jpmorgan but not down 2 million bucks. he quadrupled his month in less than a month. how did he do? the names that are heating up. need to distribute some ads. this company can hook you. you. now it looks like they are advertising for themselves. rumor has it they hired goldman sachs to ad vuz them on selling the company. investors hoping where there's smoke there's a buyer

opportunity. who is it? the answer when optio"options a" returns.

options trades pumping up the action this week. digital. >> welcome back to "options action." financials getting floored today as fears of a global selloff battered the banks.

but a couple of weeks dan made a bearish gain on jpmorgan. on "options action" there's just one way to avoid losing $2 billion. risk less so you can make more and that's just what dan did with his bearish bet on jpmorgan. dan bought jpmorgan shares set for a plunge. >> there's an opportunity to see this thing below 35. >> shorting the stock unless you want a whale of a loss. to define his risk he bought the put for $1. now make money dan's jpmorgan shares to fall below that put price or below 35 by june expiration. a whole buck? >> almost no excuse for it. >> that's for sure. dan showed us how to do this for less. to spend less he sold the june 34 put. he did something else. he made making money easier and

here's how. between the dollar he spent buying one put and the 50 cents he collected selling another dan end up paying 50 cents for the whole trade. now instead of needing jpmorgan to fall below $35 to make money if the shares fall by more than those 50 scene or below 35.50 by june expiration. but there's a tradeoff and by selling that put dan capped his gains to the difference between the strike of the put he bought and the striskt put that he sold. since the time of the trade jpmorgan shares have fallen a punishing 14%. making this trade a winner. [ applause ] now dan is in the green and "options action" biggest fan -- >> harry potter is dead. >> -- just wants to know one thing. what will dan do now? before we answer that let's see how much money was made.

shorted jpmorgan at the time of the trade you would have made 14%. his trade cost 50 bucks. can he sell today for $1.75. that more than triples your money. >> i was watching you when this call was going on, it was may 17th, i was watching "fast money." listening to the call. i was jumping out of my seat. trader after trader calling in the show we're buying at 38, we're buying at 37. kept on going lower. so i just couldn't wait to get in until options were traded the next day to get a short structure on so to me sometimes you have to press these stories. we've seen this sort of stuff before. when we laid this trade out we looked at the goldman situation back in 2010. played out very similarly. when you have a trade that worked out as well as this one did you take the money and run. >> with thisle global backdrop with what's going on in the markets do you see a lot of sentiments in terms of being short through options the banks? >> i think there was a lot of

bearish sentiment in the banks in general and jpmorgan after this news came out to be sure but now, today's announcement, when you start seeing the long end of the curve fall as far as it has and everybody is hoping the banks will earn their way out of trouble and you won't have bad stuff on the balance sheet you pulled the rug out of them by basically ruining both parts of the picture. absolutely. i think if you did take some of the money here you might put more on another lower put spread. >> quickly, dan would you put on another put spread? >> i'll wait. it's been down a lot. >> all of the banks got killed. bank of america down 4.5%. i disagree with dan on this jpmorgan thing. the global picture helped him out. there's a big difference between jpmorgan which cost themselves money and goldman sachs the advocacy. >> actually to me this one played out exactly how it should have. this was a fortress stock.

>> guys we have to take a break. a reminder if you want updates follow us on twitter as cnbc @options and dan posts regular trades.

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do not miss markets in turmoil live sunday night 9:00 p.m. eastern time to get you set up for the monday trading session. it could be a big one given today's huge loss. time for the final call. last word from the options pit. >> i would start looking at stock replacement strategies. >> given the market action today options are obviously really expensive. i would sell them. i would define my risk. sell put spread if you're bullish. >> the option prices being inflated one buy two call spread on facebook makes a lot of sense. it can work towards your favor. >> looks like our time has expired. i'm melissa lee. thank you for watching. for more go to our website optionsaction.cnbc.com.